Southwest CEO Says the Only Challenge Is ‘What to Do Next’

Southwest Airlines will focus next year on flying to the seven new international destinations it picked up from the AirTran acquisition, as well as the loosened restrictions at Dallas Love Field and new slots at Reagan National and LaGuardia Airports.

But beyond that officials are pondering “50 points on a map” to decide where new opportunities will take Southwest as it fills out its route network and ambitions.

CFO Tammy Romo made that point at the Raymond James 2014 Global Airline/Transportation Conference in New York yesterday, adding that “the challenge for Southwest is what to do next.”

The airline is weaning out its 717s in favor of 737-700s and 737-800s and as Southwest looks to new destinations the challenge “really is how far will the 737 take us,” Romo said, adding that the northern tip of South America is roughly the limit of the aircraft.

Hawaii is definitely one of those 50 points on the map as a possible new destination, Romo said, although she provided no update on Hawaii as a potential new Southwest destination.

“At least for 2015 our focus is we want to address [longer-haul] demand out of Dallas Love Field,” and additional international possibilities will open up when the international terminal at Houston Hobby Airport is completed at the end of 2015 and beyond.

Southwest, which is the largest U.S. domestic carrier with a market share of around 25%, has a cost structure that is about 30% below network carriers and 8% lower than the ultra-low cost carriers, and part of the reason is the efficiencies it gets from two — and soon to be one — aircraft types, and its lower distribution costs from driving virtually all of its Web traffic to Southwest.com, Romo said.

Perhaps downplaying inroads by low cost carriers such as Spirit and Allegiant, Romo said in the past when there was overlap with such ultra-low-cost carriers, Southwest has been “pleased” with the results.

But Southwest’s ambitions clearly go beyond competing with the low cost and legacy carriers at home, and the airline will enter a new phase over the next few years as it fills in those 50 points on a map.